Nazir Ahmad Bhat Vs Chairman/ Managing Director J&K Bank Corporate Office (Jammu & Kashmir High Court)
The petitioner, a defaulting borrower, challenged recovery proceedings initiated by the bank under the SARFAESI Act, 2002, including possession notice, e-auction notices, confirmation of sale, and issuance of a sale certificate in favour of the auction purchaser. The borrower had availed cash credit facilities that were later enhanced and secured by hypothecation of produce, multiple parcels of mortgaged land, and third-party guarantees. Due to persistent defaults, the loan account was classified as a non-performing asset on 31 March 2019, followed by issuance of a demand notice under Section 13(2). As dues remained unpaid, the bank proceeded under Section 13(4), took possession of secured assets, and initiated auction proceedings.
The borrower contended that mandatory statutory requirements were violated, alleging non-service of the Section 13(2) notice, improper conduct of auction, and denial of a 30-day redemption period under Section 13(8) read with Rules 8 and 9 of the Security Interest (Enforcement) Rules, 2002. Reliance was placed on the Supreme Court decision in Mathew Varghese v. M. Amritha Kumar to argue that failure to provide adequate notice vitiated the sale.
The bank opposed the petition, submitting that the issue was settled by the Supreme Court in Rajendran v. KPK Oils and Proteins Pvt. Ltd., which clarified the post-2016 legal position on the borrower’s right of redemption. The High Court examined the statutory scheme and the evolution of Section 13(8), noting that after the 2016 amendment, the borrower’s right of redemption stands extinguished upon valid publication of the notice of sale, subject to compliance with the Rules.
